A common notion from the world of bad economics and folk economics so prevalent here in the USA is that discussing distributional ethics, or really I suppose even thinking about distributional ethics, represents incipient “socialism.” It’s not a very serious idea, of course, and I’m not entirely sure it’s something suitable to address in a blog post, not in one of my blog posts, anyway, but I do feel I’ve been getting quite serious lately, perhaps a bit too serious, so maybe something on the lighter side wouldn’t go amiss.
Let’s start at the very beginning. All economic systems express or imply a system of distributional ethics, whether one chooses to talk about it or not. And everyone, I suppose, holds ethical beliefs relating to the proper distribution of economic power and hence distribution or allocation of any scarce resources allocated on the basis of economic power in markets. Even real anarchism, the complete absence of law and government, which under conventional language must surely represent the antithesis of “socialism,” variously defined, necessarily involves resources ending up some old place, as opposed to some other old place, and hence distributional ethics. One may suppose under anarchy resources will end up distributed by violence and guile, or perhaps some fantastical and lovely spontaneous mechanism, or perhaps even entirely by chance, but if one supports anarchism, whatever mechanism one supposes it involves will represent one’s explicit or implicit distributional ethics. That’s the funny thing about ethics. It’s completely understandable people want to avoid awkward issues. Sweep things under the rug. Pretend they’re not involved. Unfortunately, things happen. And when they do, one accepts them or does not, one tries to do something or does not. No way to avoid becoming involved really, not outside the ethically attenuated Fairy Land of Economic Theory, anyway.
Now let’s think specifically about distributional ethics in the context of markets. Markets are a venue for expressing preferences using economic power, thus supporting using markets to resolve interpersonal conflicts of preferences over scarce resources, for example, involves ethics relating to the distribution of economic power. No real instance of a market is “best” for “everyone.” The guy living in the forest may quite possibly do better under another system. Same for the gal living under the bridge. And the kid living behind the old convenience store. They’re not all doing as well as they might. If one finds the results of any real instance of a market ethically optimal, one isn’t really talking about what’s best for everyone, one is making a statement about distributional ethics. One is saying one believes everyone has what they should rightfully have, no matter how much or how little that may be.
The ethics relevant to evaluating real markets are to a small degree about how we should treat individuals expressing preferences, if there is no interpersonal conflict of preferences, and under favorable conditions like perfect information, rationality, etc. Those are the normative or ethical issues capable of being addressed using the type of “utility” we use in neoclassical welfare economics. In contrast, the ethics relevant to evaluating real markets are much more about how to resolve interpersonal conflicts of preferences, how to allocate scarce resources, even how to treat individuals expressing preferences under rather more realistic conditions, such as ignorance and incomplete rationality. All the important and controversial ethical questions associated with real markets, the significance of human welfare, “rights,” different conceptions of merit, etc., are exogenous to neoclassical welfare economics and its idiosyncratic and misleading “utility.”
Bad economics riffs off neoclassical welfare economics to talk about “social optimums,” “social welfare losses,” “deadweight losses” and so on, in real world contexts, but it’s really about the promotion and defense of opaque, obscure, implicit, exogenous, often controversial ethics. Cynics may suppose the facilitation of bad economics is the original and only real purpose of neoclassical welfare economics, but there may be a modicum of content, if one digs for it, and anyway many people enjoy parlor games, especially academic economists. The comedy inherent in our popular discourse about economic issues appears when purveyors of bad economics portray the trivial normative content of neoclassical welfare economics as all that really matters in controversial real world contexts. It’s the mouse that roared. Whatever sells in the “marketplace of ideas?” That’s some shoddy workmanship, right there. Bad economics and related folk economics is to a large extent, perhaps entirely, an empty, insincere, misleading, rhetorical, confidence game. It’s not designed to explain anything, to elucidate any real issue. Indeed, just the opposite.
Yes, in what passes for our social conversation about economic issues here in the USA it’s the battle of neoclassical welfare economics, with its trivial half-ethics and misleading pseudo-socialistic “social optimums” and “social welfare” supporting bad economics and its implied, opaque, exogenous, controversial distributional ethics versus the ostensible incipient “socialism” of anyone who wants to talk plainly and honestly about distributional ethics, real economics, resolving interpersonal conflicts of preferences, the allocation of scarce resources, hunger and castles on Mars. It’s comical, but not in a good way. Our time is short, my friends. Don’t spend it talking rot and acting the fool. The small window we have to help this struggling world of ours, the young, future generations, will close on all of us soon enough, perhaps forever. Be real. Respect philosophy. Fight bad economics.
